NSE turnover hits Sh115bn, touches record annual high

Nine-month trade volumes at the Nairobi Securities Exchange (NSE) have surpassed last year’s total, setting the stock market on course to hitting a new annual turnover record.

Data released by the exchange for up to end of September shows the NSE equity turnover for the nine months to September 2013 stood at Sh115.4 billion, compared to Sh86.8 billion for the full year 2012, Sh78.1 billion for 2011 and Sh110.3 billion for 2010-- which is the highest ever annual turnover recorded by the NSE.

Market turnover to September 2013 is double what it was in the first nine months of 2012, when it stood at Sh57.6 billion. In the period between January and September 2011, turnover stood at Sh65.7 billion, while in the same period in 2010 it was Sh84.9 billion.

The stock market has seen heightened activity this year from foreign investors who have raised their appetite for blue-chip stocks.

The rise in investor activity has coincided with a bull-run that has persisted for over one year at the NSE. The NSE 20-Share Index has gained 25 per cent in the past one year, translating into substantial gains for investors.

The trend has continued into the first week of the fourth quarter of the year, setting the bourse for a year of record turnover.

“Foreign investors have raised their bets on Kenya since the stock market entered a bull market in May 2012. The bull market has been relentless,” said investment analyst and chief executive of Rich Management, Aly-Khan Satchu.

Foreign investor purchases up to September stand at Sh70.2 billion, double the buys up to September last year which stood at Sh35.1 billion and already outstripping the 2012 full year foreign buys of Sh54.3 billion.

In terms of foreign investor sales, the trend is similar, with the sales of up to September 2013 (Sh47.5 billion) more than doubling those of up to September 2012 (Sh21.8 billion), and also up on the 2012 full year sales of Sh32.6 billion.

Monthly turnover hit a historic high of Sh21 billion in August driven by a one-off block trade of Nation Media Group shares worth Sh6.1 billion. Previously, the highest monthly turnover at the NSE was Sh16 billion, achieved in May this year and August 2010.

This year, only in January and April had the monthly market turnover fallen below Sh10 billion, a mark achieved only twice in 2012 (October and November) and on five months in 2010. In 2011, monthly turnover did not hit Sh10 billion in any month.

The Capital Markets Authority, in its 2013-2017 strategic plan, put the target for a combined bonds and equities turnover at Sh1.04 trillion for 2013, rising to Sh6.83 trillion in 2017.

The bond and equities combined turnover in first nine months of 2013 stands at Sh465 billion compared to a full-year total of Sh652.5 billion in 2012, Sh523 billion in 2011 and Sh593 billion in 2010.
Investors, especially those holding blue-chip stocks, have made double-digit gains in the past one year.

Market capitalisation has climbed to Sh1.87 trillion, with major counters like Safaricom, EABL, KCB and Equity bank gaining Sh172 billion, Sh61 billion, Sh58 billion and Sh50 billion this year respectively in capitalisation.

Risk and research firm Stratlink Kenya, in its October markets update, say that the build-up in equities markets’ momentum is in line with year-end expectations, with a taper only likely to be brought in by the December holidays.

“Going forward, we are of the view that the Nairobi bourse will witness increased activity on the back of expected quarter three earnings posting by listed commercial banks,” said Stratlink.

The bourse has weathered the expected shock from a sharp rise in inflation as a result of the new value added tax laws and the terror attack at Westgate mall in September. This, according to analysts, is partly due to the falling interest rates and investors considering the terror attack as a one-off event.

Political risk, however, remains for the stock market, according to Stratlink Kenya, with the ongoing cases at The Hague set to dominate the national space for the remaining months of the year.

“If you look at the interest rate differentials between Kenya and the source markets for the capital, we see a trend of investors borrowing from there and investing in the local market for better returns.

The big risk to the current rally in the market is if interest rates rise elsewhere,” said Suntra Investments, head of research Johnson Nderi.